An executive of Riverside General Hospital was arrested and charged Wednesday in a $116 million Medicare scheme involving kickbacks to patient recruiters and the owners of homes for the elderly and disabled in exchange for steering residents to Riverside's mental health clinics.

Mohammad Khan, 63, is identified in the indictment as an administrator "who managed and controlled the day-to-day operations of the hospital's (clinics)," where he is accused of also plying supposed patients with cigarettes, food and coupons redeemable at the hospital's "country stores" in order to entice them to therapy.

Khan, who began working for Riverside General Hospital in Houston's Third Ward, is known as "Dr. Khan" by his co-workers even though it appears he is not licensed to practice medicine in Texas. He's charged with seven counts: conspiracy to commit health care fraud, conspiracy to pay health care kickbacks and five additional health care kickback charges.

Riverside is not charged with any crime. Hospital spokeswoman Tasha Armstead confirmed Wednesday that Khan was Riverside's assistant administrator and said the hospital is cooperating with authorities.

"He has been placed in custody. He has been arrested," said Armstead, who declined to take more specific questions.

According to the indictment, Khan is accused of submitting, along with unnamed co-conspirators, $116 million in mental health claims "purportedly provided by the hospital" that were not medically necessary "and in some cases, never provided."

Federal prosecutors claim Khan paid one patient recruiter $5,000 twice in 2011 so the recruiter would refer Medicare beneficiaries to Riverside General's six Houston-area clinics offering outpatient psychiatric care, and that he paid a second recruiter $300 a head for each patient referral.

Clinics not licensed

The indictment further claims he paid the owner of a group home $3,900 in exchange for referring residents to the hospital.

A Houston Chronicle investigation last year documented the continuing flow of federal taxpayer dollars to for-profit mental health clinics, known as partial hospitalization programs, or PHPs, even though they require no license to operate in Texas and collect millions from Medicare.

Texas, Louisiana and Florida, which generate 76 percent of all PHP claims to Medicare, are states well-known as high-fraud areas to the dollar-doling federal Centers for Medicare and Medicaid Services.

Must hire own lawyer

Of the approximately $50 million in Medicare spent during 2010 on outpatient psychiatric clinics in Texas, more than 75 percent went to Harris County.

Data obtained by the Chronicle through the Freedom of Information Act indicates Riverside General Hospital received more than $6 million in 2010 from Medicare for PHP claims.

A disheveled Khan appeared before U.S. Magistrate Nancy Johnson, asking that the court pay for an attorney for him. After revealing he has a 1998 Lexus, has between $3,000 and $8,000 in his bank account and was paid $5,000 a month by Riverside, Johnson denied his request. She gave him until Thursday to find an attorney, and he is to report back at 10 a.m.He remains in federal custody.

Federal agents descended on the hospital at 3204 Ennis, leaving with boxes of records.

They have requested records from at least one of the hospital's clinics, the Riverside General Devotions Care Solutions, a psychiatric clinic at 7655A Bellfort, a source told the Chronicle.

Attempts to contact the operator of the clinic — Earnest Gibson IV, son of Riverside's administrator Earnest Gibson III — were unsuccessful. There was no answer at the clinic Wednesday.

The younger Gibson is a former business associate of Julian Vence Kimble, who pleaded guilty last year to masterminding an $8 million Medicare fraud scheme in which he used four private ambulance companies to ferry fake patients to mental clinics.

A message left for the elder Gibson early Wednesday was not returned.

Bob Moos, a Dallas spokesman for Medicare, declined to comment on the ongoing investigation.

Hospital dates to 1926

Riverside, licensed as a general hospital by the Texas Department of State Health Services, opened its doors in 1926 as the Houston Negro Hospital with seed money from Joseph

Cullinan, the founder of the Texas Company, which became Texaco. Cullinan helped build the hospital as a memorial to his son, who had led African-American soldiers during World War I.

In 1961, it was renamed Riverside General Hospital. In 2010, Congresswoman Sheila Jackson Lee helped secure a $1 million Department of Defense grant for the treatment of active-duty troops and veterans for post-traumatic stress disorder.

Last year, FEMA approved $19 million in funds for Hurricane Ike repairs at the hospital's Edith Irby Jones Facility, located next door to the Devotions clinic.